Graeme Sloan/Sipa USA via AP Images
House Speaker Nancy Pelosi (D-CA) signs the Inflation Reduction Act during a bill enrollment ceremony after the House voted on its passage, August 12, 2022, at the Capitol in Washington.
Presidential polling in recent weeks offers some credence to my rather obvious theory that delivering for the American people matters in American politics. The low point for Joe Biden’s approval ratings was just before the day that Chuck Schumer and Joe Manchin announced a deal on a climate, health care, and tax policy bill, which cleared Congress last Friday. Biden (who wasn’t particularly involved in the negotiating process but who as the party’s standard-bearer gets credit for its successes) has regained three points in the polls since then, ending a yearlong downward slide.
Similarly, the generic ballot test really only started to narrow for Democrats in recent weeks, not with the Supreme Court’s ruling overturning Roe v. Wade but with the spate of congressional victories. Voters are rewarding action after a long period of inaction, and while the abortion issue is playing a role, in a broader sense the Democratic strength in getting things done for the American people is resonating.
However, that benefit is fragile, especially if what’s being touted as progress doesn’t pan out or isn’t immediately visible to the public. That’s what’s so confounding about the Inflation Reduction Act’s prescription drug reforms. The two major pieces that offer the most impact to seniors not only don’t take effect before this national election, but not even before the next one. There doesn’t seem to be any credible reason for this delay, other than as a favor to the pharmaceutical lobby. But it’s potentially debilitating to Democrats’ political fortunes, as they are overpromising relief for seniors that won’t materialize for years and years.
The two biggest benefits for seniors in the IRA are the Medicare negotiation of certain high-cost prescription drugs, and the $2,000 out-of-pocket cap. But while price negotiations technically start next year, no consumer will see the benefit until the new prices begin in 2026, and even then on only 10 drugs (another 15 are added in 2027 and 2028, rising to 20 by 2029 and subsequent years).
You could squint and maybe understand the need for a little delay in setting up a negotiation regime. There are some parameters to set up, like the benchmarks for prices and the penalties if drug companies refuse to deal. Maybe you have to train negotiators. But none of that can possibly explain the three-year delay between the beginning of negotiation and the realization of price discounts for seniors. To be crass, it means that substantial numbers of seniors living now will not be alive when the reduction in certain prescription drug prices is realized.
The $2,000 out-of-pocket cap, which is across the board for all seniors, not just on certain drugs, is even worse. That cap doesn’t go into effect until 2025, although out-of-pocket costs get capped at $4,000 in 2024. If there is kind of an explanation for delays in setting up Medicare drug price negotiation, for the out-of-pocket cap there is not. You literally tally up patient out-of-pocket costs, which are fully transparent, until they hit $2,000, and then stop them. Why does this take more than two years to pull off? Medicare itself, the entire program, took only a year to implement.
The two major pieces that offer the most impact to seniors not only don’t take effect before this national election, but not even before the next one.
“We’re claiming that we’re reducing drug prices but the average American is not going to see that,” said Rep. Pramila Jayapal (D-WA), chair of the Congressional Progressive Caucus, in an interview. “That’s the part of the bill that gives me the most heartburn.”
Usually, the reason that major programs are delayed in this day and age is that they cost money once enacted, and dealing with the vagaries of budget scoring means that one way to reduce those costs is to slow down the implementation timeline, so inside the ten-year budget window the programs look cheaper. This is probably why the out-of-pocket cap was delayed—though the cost of the cap isn’t that extensive, and the other limits on drug price growth in the bill make the cap even cheaper.
But the Medicare price negotiation saves money. You would want that to happen as soon as possible, especially if you want to offset spending in the bill. At the very least, there’s no reason to delay negotiation to game the budget reconciliation score.
The only plausible explanation for this is that drug companies asked for more time before the negotiations kicked in, and got just that. Drug industry lobbyists are the biggest spenders on Capitol Hill, and they successfully got their most loyal congressional Democrats to significantly weaken the reform measure. The delay on price negotiation fits with that weakening.
Other parts of the bill do come online more quickly. The insulin price cap of $35 a month for Medicare recipients starts in 2023, as does free vaccine coverage in Medicare and the rebates on Medicare drugs with price increases above inflation. But the inflation rebate is benchmarked to 2021 prices, locking in those high costs, and just would mute price growth. The real benefits here are Medicare negotiations that lower drug prices, and the cap on all prescription drug costs for seniors. Those are delayed.
The problem here, of course, is that Democrats are going all out in selling this bill as a historic reform to lower drug costs for seniors. They are affirmatively running on it in this midterm election to draw contrast with Republicans. Rep. Abigail Spanberger (D-VA), in a tough race in the Virginia suburbs, told The Washington Post that with this bill, she would be able to “look a retiree in the face and say we are capping your out-of-pocket costs.”
But she can’t, at least not for this election, or the next one. “I think [it] is understood that is not fast,” Spanberger said to the Post. That is absolutely incorrect; seniors will find out their drugs aren’t capped when they keep paying and paying for them, and the nuance of the messaging in the midst of those piled-up fees will be completely lost, in all likelihood.
It is absolutely insane for a political party to boast that it lowered prices for seniors when the price reductions are years and years down the road. That kind of de facto bait and switch leads to distrust and anger. You’d have thought Democrats would have learned this lesson in the Affordable Care Act, whose major benefits didn’t kick in for four years after passage, a time lag that helped lead to two midterm wipeouts. But here we are again, as Democratic officials tout a drug price reform that isn’t visible to anyone.
That’s to say nothing of the fact that only seniors will benefit, a function of the annoying budget reconciliation rules that limit changes to federal budgetary programs. There were 63.9 million people on Medicare as of 2021. Another way of saying that is that there are 270 million or so people not on Medicare, and they’re all hearing about how Democrats are lowering drug prices, though they won’t see any change.
In fact, it could get worse for them, thanks to the Senate parliamentarian, who took out the inflation rebate provision for private insurance payers, claiming that wasn’t a budgetary cost. Of course, the drug industry is an interconnected system: If drug companies have to give a rebate on Medicare drugs because they raise prices too high, they can easily make up for it by raising prices higher off Medicare. So the impact for the majority of Americans of this drug price reform could be higher drug prices.
That’s not necessarily Democrats’ fault (although they could have ignored the parliamentarian, of course). What is their fault is the failure to immediately make evident the benefits of the policy. Democrats have had a tendency to break faith with their base, to make promises and fail to deliver. Here’s a policy they’ve been promising for nearly two decades, they pass the policy, and they’re going to spend years explaining how the implementation is just around the corner. It comes off as double-talk and toxifies a political brand. And in this case, it was unnecessary.
